RAG defends €2.4bn sale of minority stake in Evonik

06 August 2010 20:53[Source: ICIS news]

TORONTO (ICIS)--RAG-Stiftung, the majority owner of Germany-based specialty chemicals major Evonik, on Friday defended the 2008 sale of a 25.01% minority stake in the company for €2.4bn ($3.2bn) to private equity firm CVC against criticism.

?xml:namespace>German business daily Handelsblatt reported that state auditors had criticised the terms of the 2008 deal.

The 2008 agreement allegedly granted CVC special rights and influence over Evonik that went beyond the rights of a minority stakeholder, according to the paper, which cited unnamed insiders.

Also, RAG had involved its supervisory board – called “Kuratorium” – only very late in the negotiations, the paper reported.

RAG rejected the newspaper’s coverage as “tendentious, abridged, and partially wrong”, it said in a statement.

It said the 2008 negotiations had been conducted transparently, the Kuratorium had been informed throughout and had approved the agreement with CVC.

In cases of disputes over fundamental business decisions and strategies at Evonik, RAG would seek to find an agreement with CVC. If that failed, RAG had the right to make a final decision, it said.

RAG also rejected criticisms that bonus payments for RAG chairman Wilhelm Bonse-Geuking and some board members were not transparent.

The bonus payments, which included fixed and a variable components, had been properly approved, it said.

Bonse-Geuking said he believed the 2008 sale of the 25.01% stake to CVC was a "very good deal" for RAG, given that at the time the full 100% estimated value of Evonik was only around €5.8bn.

In 2008, German politicians, analysts, commentators and unions generally welcomed the deal with CVC, which was believed to have netted much higher proceeds than could have been achieved through an initial public offering at the time.

RAG-Stiftung is a coal foundation that is charged under a law – the German “Steinkohlefinanzierungsgesetz” – with overseeing the phase-out of the country's subsidised hard coal production by 2018.

Proceeds from an eventual sale or initial public offering of Evonik are meant to help pay for environmental costs and liabilities associated with the phase-out. If the proceeds do not cover the costs, German taxpayers will likely have to make up the difference.

Meanwhile, the new government of Germany’s North Rhine-Westphalia state said it would insist on “the best possible transparency” at RAG.

If necessary, the government would seek to change RAG’s regulatory framework, the ruling Social Democrat-Green Party government, which took office last month, said in its coalition agreement. North Rhine-Westphalia is the home state of RAG and Evonik